The double bottom line of microfinance: A global comparison between conventional and Islamic microfinance

Syedah Ahmad, Robert Lensink and Annika Mueller

World Development, 2020, vol. 136, issue C

Abstract: Conventional microfinance institutions (MFIs) can promote financial inclusion, but they also prompt ethical concerns regarding the social consequences of commercialization and high interest rates. Islamic MFIs, which adhere to Sharia’s prohibition of riba (usually interpreted as a ban on interest), present an alternative. Differences between conventional and Islamic MFIs in terms of outreach and financial sustainability remain underexplored; no comprehensive data set details Islamic MFIs either. With new data, collected with a global survey, the authors construct a unique panel of 543 conventional and 101 Islamic MFIs, operating in Islamic and non-Islamic countries. These data suggest that the market for Islamic microfinance is more important than previously recognized, has grown in recent years, and is likely to continue growing in every region of the world. Statistical comparisons, using various estimation techniques, regarding the outreach and financial performance of Islamic and conventional MFIs also reveal that the breadth and depth of Islamic MFIs exceed those of conventional MFIs, though conventional MFIs achieve stronger financial performance. This latter result is not robust though.

Keywords: Islamic microfinance; Social entrepreneurship; Ethical finance; Outreach; Financial performance (search for similar items in EconPapers)
JEL-codes: G21 L21 L31 Z12 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:136:y:2020:i:c:s0305750x20302576

DOI: 10.1016/j.worlddev.2020.105130

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